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DRAFT E-COMMERCE POLICY OF INDIA: AN APPRAISAL

This piece has been authored by Soumya Tiwari, a second-year student at Rajiv Gandhi National University of Law, Punjab.

The Department for Promotion of Industry and Internal Trade has come up with the revised draft of e-commerce policy (hereinafter “the draft policy”) on February 23 which was open for comments till March 29, 2019.[i] The high value of Indian e-commerce market justifies the requirement of regulation of this sector. As per the India Brand Equity Foundation (IBEF), the Indian e-commerce market is expected to grow to US$ 200 billion by 2026 from US$ 38.5 billion as of 2017.[ii] This is also important in the wake of on-going discussions on regulation of e-commerce in World Trade Organization (WTO). The draft policy is multi-dimensional in its approach as it covers various aspects related to e-commerce like data, infrastructure development, e-commerce marketplaces, regulatory issues, stimulating domestic digital economy and export promotion.[iii]

Data Protection

The draft policy states that everyone has right to his or her data. It extrapolates this concept to provide that data of a group of people is also of value and therefore it should be treated as a collective resource. According to the draft policy, “all data generated in India and all derivatives of that data should belong to Indians because data is a collective resource and a national asset that the government holds in trust for its citizens.”[iv] It proscribes sharing of data of Indians stored abroad with third party entities or any foreign government, even with the consent of the data principal unless the government allows it. It further provides that the Indian government must have access to this data at all times. Many commentators have argued that, in a way the government is trying to nationalize personal data. [v]

The draft policy further provides that a suitable framework would be developed for sharing of community data that serves larger public interest (subject to addressing privacy-related issues) with start-ups and firms.[vi] The implementation of this framework would be undertaken by a data authority to be created for this purpose. As regards privacy, the draft policy proscribes unsolicited marketing or advertisements like advertisements through emails, calls and messages.

However, certain categories of data are exempted from restrictions on cross-border data flow. Data not collected in India, B2B data shared between business entities under a commercial contract, data flowing through software and cloud computing services (having no personal or community implications), data (excluding data generated by users in India from sources like e-commerce platforms, social media activities, search engines) shared internally by multinational companies are exempted from restrictions on cross-border data flows.[vii]

Data Protection is the most criticized aspect of Draft Policy. The position taken in the draft policy is completely in contrast with the recommendations of the Justice Srikrishna committee and the privacy judgment. Here, Government is deciding for everyone and individual is left with little say. Further, the efficacy of data localization is also questioned by data protection experts. In 2018, Reserve Bank of India (RBI) commanded payment gateways such as Mastercard and Visa to store data of Indian users locally.[viii]

Transparency and Accountability

E-commerce companies would now have to make publicly available all relevant details of the sellers listed on their portals. Further, online retailers would have to share their phone numbers and email addresses to address consumer grievances. They will have to offer a primary solution to consumer grievances within a week. Ratings of all customers for verified purchases have to be published, except those which are found to be promotional, abusive or inappropriate. E-commerce companies will also have to keep a check on fraudulent reviews by sellers or their affiliates. They are also required to clearly mention maximum retail prices (MRPs) on all packages and bills in Indian currency.

Besides, all e-commerce sites or apps available for download in India must have a registered business entity in India as the importer on record or as the entity through which all sales in India are transacted.[ix] This is essential for ensuring compliance with existing laws and regulations and enhancing protection of consumers.

As an anti-counterfeit measure, now sellers would be needed to give an undertaking to the e-commerce companies regarding the genuineness of the products and the same would be accessible by the consumers. Failing this, sellers cannot get their products listed on the e-commerce websites.

Tax Policies

The draft policy would ensure that customs route is strictly followed by e-commerce companies. At present, Chinese e-commerce retailers like Club Factory, Romwe, and Shein allegedly exploit the “gifting” rule, according to which personal gifts below Rs 5000 are exempted from duties, to circumvent custom duties.[x] The draft policy forbids gifting, except for life-saving drugs. Further, it also contemplates imposing custom duties on electronic transmissions in view of changing digital economy.

Investment and Export Promotion

Government has also revised Foreign Direct Investment (FDI) Policy in e-commerce. The new FDI policy on e-commerce marketplace businesses aims to invite and encourage FDI in the marketplace model “alone”, which is being carried out by companies like Flipkart and Amazon.[xi] Therefore, FDI infused e-commerce platform cannot exercise ownership or control over the inventory sold on its platform.[xii] In this way, the draft policy which also emphasized on this aspect, will also encourage independent selling, i.e. sales not controlled or influenced by e-commerce companies.[xiii] This would, in turn, give impetus to small retailers. The draft policy also prohibited discriminatory practices in favour of few sellers by online marketplaces.

To encourage exports through e-commerce, the draft policy stressed on the need to reduce administrative requirements for outbound shipments. It further said that the existing limit of Rs 25,000 shall be increased to make Indian e-commerce exports attractive even for high-value shipments through courier mode. [xiv]

Analysis

The draft policy has some serious loopholes. It includes within the term ‘e-commerce’, market platforms for online services like Netflix, Spotify, Amazon Prime, etc. Some experts fear that the application of prohibition of FDI powered e-commerce companies from owning or controlling inventory on above mentioned e-commerce companies can debar them from streaming their original contents.[xv]

The draft policy also aims to govern ‘the digital economy’, which is a vague term and seems to include all networked communications and relationships, from social media to private communication applications; user-generated content hosts to news blogs.[xvi] Further, it ignores the international principles of intermediary liability by respectively making marketplaces and social media directly liable for counterfeit goods and content on their websites.

India has been against the negotiations on e-commerce norms at WTO, however, its argument has not been forceful in the absence of clear national policy on e-commerce. More than half of the members of WTO are already in support of negotiating e-commerce rules. One of the major aims of this policy is to give an edge to the domestic players. The policy is patently biased against foreign e-commerce companies. The discriminatory rules are not likely to find favour with WTO. Also, India’s inclination towards imposing taxes on online transactions is in contrast with the stance of developed countries to make permanent the present ban on ‘global online transactions’.

Conclusion

This new draft policy, if accepted at its present form, would inevitably lead to some reduction in foreign investment in e-commerce. For consumers, strong anti-counterfeiting and anti-piracy measures are a big relief. However, new restrictions may cause a slight slump in investment in the e-commerce sector, which may consequently result in lesser discounts for the customers. Many commentators view this policy as a protectionist measure that would stifle innovation, and hurt consumer choice and capital flow. The draft policy has some far-reaching shortcomings with regards to data protection.

[i] Draft National e-Commerce Policy India’s Data for India’s Development, Department of Industrial Policy & Promotion, https://dipp.gov.in/sites/default/files/DraftNational_e-commerce_Policy_23February2019.pdf (last accessed on Apr 16, 2019).

[ii] Punit Dutt Tyagi, A regulated India for Flipkart, Amazon: Here’s what draft policy means for $125 billion e-commerce market, Financial Express, Nov 29, 2018, https://www.financialexpress.com/industry/a-regulated-india-for-flipkart-amazon-heres-what-draft-policy-means-for-125-billion-e-commerce-market/1398362/ (last accessed on Mar 6, 2019).

[ii] Punit Dutt Tyagi, A regulated India for Flipkart, Amazon: Here’s what draft policy means for $125 billion e-commerce market, Financial Express, Nov 29, 2018, https://www.financialexpress.com/industry/a-regulated-india-for-flipkart-amazon-heres-what-draft-policy-means-for-125-billion-e-commerce-market/1398362/ (last accessed on Mar 6, 2019).

[iii] PTI, Govt proposes conditions for data storage abroad in draft e-commerce policy, The Print, 23 Feb 2019 https://theprint.in/governance/govt-proposes-conditions-for-data-storage-abroad-in-draft-e-commerce-policy/197148/ (last accessed on Mar 6, 2019).

[iii] PTI, Govt proposes conditions for data storage abroad in draft e-commerce policy, The Print, 23 Feb 2019 https://theprint.in/governance/govt-proposes-conditions-for-data-storage-abroad-in-draft-e-commerce-policy/197148/ (last accessed on Mar 6, 2019).

[iv] Rahul Matthan, India's draft e-commerce policy is more a miss than a hit, Live Mint, 26 Feb 2019,

[iv] Rahul Matthan, India's draft e-commerce policy is more a miss than a hit, Live Mint, 26 Feb 2019,

https://www.livemint.com/opinion/columns/india-s-draft-e-commerce-policy-is-more-a-miss-than-a-hit-1551199993484.html (last accessed on Mar 6, 2019).

[v] Id.

[v] Id.

[vi] Id.

[vi] Id.

[vii] --, Draft e-commerce policy aims at sector growth along with Make in India, Digital India, Business Today February 23, 2019, https://www.businesstoday.in/current/policy/draft-e-commerce-policy-aims-at-sector-growth-along-with-make-in-india-digital-india/story/321564.html (last accessed on Mar 6, 2019).

[vii] --, Draft e-commerce policy aims at sector growth along with Make in India, Digital India, Business Today February 23, 2019, https://www.businesstoday.in/current/policy/draft-e-commerce-policy-aims-at-sector-growth-along-with-make-in-india-digital-india/story/321564.html (last accessed on Mar 6, 2019).

[viii] Supra note 3.

[viii] Supra note 3.

[ix] Id.

[ix] Id.

[x] Ananya Bhattacharya, Who wins and who loses if India’s draft e-commerce rules are implemented, Quartz

[x] Ananya Bhattacharya, Who wins and who loses if India’s draft e-commerce rules are implemented, Quartz

February 25, 2019, https://qz.com/india/1558186/whom-does-indias-draft-e-commerce-policy-really-help/ (last accessed on Mar 6, 2019).

[xi] Supra note 3.

[xi] Supra note 3.

[xii] Id.

[xii] Id.

[xiii] Krishna Karwa, Draft national e-commerce policy: More pain in store for Amazon, Flipkart, Money Control https://www.moneycontrol.com/news/business/draft-national-e-commerce-policy-more-pain-in-store-for-amazon-flipkart-3608611.html (last accessed on Mar 6, 2019).

[xiii] Krishna Karwa, Draft national e-commerce policy: More pain in store for Amazon, Flipkart, Money Control https://www.moneycontrol.com/news/business/draft-national-e-commerce-policy-more-pain-in-store-for-amazon-flipkart-3608611.html (last accessed on Mar 6, 2019).

[xiv] Supra note 3.

[xiv] Supra note 3.

[xv] Neha Alawadhi & Subhayan Chakraborty, Proposed e-commerce norms cloud future of Netflix, Hotstar, Amazon Prime, Mar 17, 2019, Business Standard, https://www.business-standard.com/article/companies/proposed-e-commerce-norms-cloud-future-of-netflix-hotstar-amazon-prime-119031600795_1.html (last accessed on Apr 16, 2019).

[xv] Neha Alawadhi & Subhayan Chakraborty, Proposed e-commerce norms cloud future of Netflix, Hotstar, Amazon Prime, Mar 17, 2019, Business Standard, https://www.business-standard.com/article/companies/proposed-e-commerce-norms-cloud-future-of-netflix-hotstar-amazon-prime-119031600795_1.html (last accessed on Apr 16, 2019).

[xvi] Divij Joshi, India’s Quest for Data Sovereignty Needs to Go Beyond Grandstanding Gestures, The Wire, 08 Mar, 2019, https://thewire.in/tech/india-data-sovereignty-draft-e-commerce-policy (last accessed on Mar 8, 2019).

[xvi] Divij Joshi, India’s Quest for Data Sovereignty Needs to Go Beyond Grandstanding Gestures, The Wire, 08 Mar, 2019, https://thewire.in/tech/india-data-sovereignty-draft-e-commerce-policy (last accessed on Mar 8, 2019).

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